Bank investigator testifies against Nifty Fifty's owners

PHILADELPHIA -- The owners and several employees of the Nifty Fifty's restaurant chain were back in U.S. District Court on Monday for a sentencing hearing before Judge Mary A. McLaughlin.

Owners Leo McGlynn, 52, of Swarthmore, Robert D. Mattei, 73, of Delray Beach, Fla., and Joseph Donnelly, 49, of Springfield, along with managers Brian Welsh, 48, of Springfield, and Elena Ruiz, 46, of Drexel Hill, pleaded to tax evasion and conspiracy charges for skimming at least $15.6 million in receipts at the restaurants between 1986 and 2010, and failing to pay $2.2 million in federal employment and personal taxes. Welsh also pleaded to one count of bank fraud.

They listened as a Sovereign Bank investigator testified that an accountant, allegedly hired by the defendants to prepare false tax returns, embezzled nearly $2 million from the business' bank accounts.

Cindy Wessner-Schaeffer testified that she first noticed a problem with the defendants' accounts when McGlynn applied for a mortgage for a vacation home in Sea Isle City, N.J. The income documentation provided on the loan application was $200,000, much higher than the $78,000 reported to the IRS, she said. When she began going through the bank records, she found almost $2 million in cash transactions that had been paid to the accountant out of the company's tax escrow account. At least two of those transactions were mortgage payments for the accountant's home, she said.

Wessner-Schaeffer said that when she told Mattei about the irregularities she and her investigators found with their accounts, Mattei instructed her to leave it alone. The accountant, Mattei told her, was a longtime family friend and they would deal with the matter internally, she testified.

"All he said was that they wanted to handle it as a family matter," she said.

Instead, Wessner-Schaeffer contacted the IRS.

"If a company has an embezzlement of $2 million and doesn't want to do anything about it, it sends up incredible red flags to me," she said.

Sovereign Bank subsequently ended its relationship with the defendants.

The defendants opened their first retro restaurant at the corner of MacDade Boulevard and Route 420 in the Folsom section of Ridley Township in 1986.

Long popular with locals, the owners expanded their business, eventually opening restaurants in Northeast Philadelphia, Bensalem, Turnersville, N.J., and Clementon, N.J.

Federal authorities allege that since the first restaurant opened in Delaware County in 1986, the defendants evaded paying taxes on $15.6 million in cash receipts and hid cash in personal safes and safe deposit boxes.

They could spend decades in prison and be ordered to pay millions in fines if convicted of skimming $15.6 million in receipts and failing to pay $2.2 million in federal employment and personal taxes.